Study shows budget deal will cut spending by only $352 million

By Tim Fernholz

April 14, 2011

A Congressional Budget Office analysis of the fiscal 2011 spending deal that Congress will vote on Thursday concludes that it would cut spending this year by less than one-one hundredth of what both Republicans or Democrats have claimed.

A comparison prepared by the CBO shows that the omnibus spending bill, advertised as containing some $38.5 billion in cuts, will only reduce federal outlays by $352 million below 2010 spending rates. The nonpartisan budget agency also projects that total outlays are actually some $3.3 billion more than in 2010, if emergency spending is included in the total.

The astonishing result, according to CBO, is the result of several factors: increases in spending included in the deal, especially at the Defense Department; decisions to draw over half of the savings from recissions, cuts to reserve funds, and mandatory-spending programs; and writing off cuts from funding that might never have been spent.

National Journal previously reported that after removing rescissions, cuts to reserve funds, and reductions in mandatory-spending programs, discretionary spending would be reduced only by $14.7 billion. CBO's analysis, which takes into account the likelihood that certain authorized funding will never be spent, suggests that the actual cuts will be even smaller.

With some conservatives already opposing the deal for not going far enough to meet the GOP campaign pledges to cut $100 billion, the news could complicate House Republicans' efforts to pass the bill. The minimal effect on current government spending, however, could improve macroeconomic forecasts that predicted lower economic growth if government spending was drastically reduced.

The CBO did confirm that budget authority would remain $78.5 billion below what President Obama requested in his fiscal 2011 budget request, and Republicans can point to long-term savings as a result of lowering the government's spending baseline, including some $40 billion from cuts to Pell Grants.

"It is kind of crazy to have come to the brink of shutting down the government over a $350 million difference," said Scott Lilly, a former staff director at the Appropriations Committee under Chairman David Obey, D-Wisc.